What Are The Pros And Cons Of Arbitration Agreements

For: An arbitrator is generally not bound by legal principles and is not required to explain or justify the decision. In addition, the decision is not subject to an error-of-law review. An arbitrator is generally empowered to make a decision on the basis of what he or she deems fair and equitable under the contract between the parties. In summary, the arbitration procedure is a very useful tool for resolving disputes, but it is important to carefully consider whether it is applicable or preferable to a particular dispute. Your lawyer will advise you if this is appropriate in your case. Although arbitration agreements offer many professionals, you can incorporate some remarkable drawbacks. In the area of litigation, we encourage our clients to include arbitration agreements in their contracts from the outset. In order to ensure the application of arbitration clauses, it is preferable to fully inform employees of the arbitration procedures and the consequences of signing an arbitration agreement. The compromise clause should apply to a large extent to all possible claims.

The language must be clear and easy to understand. Complex arbitration clauses are easy to avoid. A court will only enforce a compromise clause in a contract if the enforcement party can prove that the other party has been fully informed and voluntarily accepted the provisions. Con: Although it is not mandatory, most parties choose to be represented by a lawyer. As a result, cost savings that are not related to a lawyer are often not realized. And unlike court documents, which are relatively nominal, arbitration normally requires significant registration and arbitration fees. For example, the American Arbitration Association (AAA) calculates administrative fees based on the amount of the claim or counter-debt, which amounts to $975 for claims under $10,000 to $8,700 for claims ranging from $500,000 to $1 million. In addition, the parties must compensate the arbitrator or arbitrator for their time. An individual referee`s fee may exceed $1,500 per day.

Con: A party in arbitration may be confronted with the correspondence and sworn assurance of third-party witnesses who are not available for cross-examination. Similarly, a party may be confronted, in the course of an arbitration proceeding, with testimony that is not aware of the purpose of its testimony.